Coffee led a retreat in farm commodities, slumping 8% in London, undermined by a broad retreat by investors from riskier assets, accelerated by the triggering of a barrage of automatic sell orders.

Many commodities fell on Tuesday as investors opted for safe assets amid growing fears for double-dip recessions in mature economies, including the US, where sales of previously-owned homes fell to their lowest in 15 years.

Oil was 2.3% lower at $71.41 a barrel at 20:00 GMT, with Chicago crops down across the board, including wheat, which lost 2.5%.

Gold, often counted as the ultimate safe haven, reversed early losses to rise by nearly 1%.

'Largely technical'

However, the most notable decline was seen in coffee beans which slumped by 8% in both New York and London, where the spot September contract closed at a two-month low of $1,600 a tonne.

However, traders blamed the extent of the fall on a vicious circle of sales triggering pre-set sell orders which, in a market traders noted for a recent lack of volume, exacerbated the price swing.

"It's largely technical. Technical levels were breached, and sell stops were hit," a London soft commodities trader told Agrimoney.com.

'Telling volatility'

The comments were echoed by Jake Wetherall at Rabobank, who said that similar dynamics had also been seen in at work in sugar, which fell 4% in New York at one stage before being helped by short-covering and some persistent crop fears to a high finish.

"Coffee was particularly heavily sold, when sell stops were hit in an illiquid market, We saw sell stops hit in sugar too," Mr Wetherall said.

On Monday, Ralph Hawes at Sucden Financial warned over the low volumes in coffee markets, terming "negligible volumes" as an "all too familiar" characteristic, promoting price swings.

In New York, "the volatility can be particularly telling during [UK] morning sessions, before the US is effectively open for business", he added.

Corn condition

Among grains, wheat's weakness was attributed to profit-taking provoked by improved prospects for autumn sowings in Russia, following rains in some areas hit by the country's worst drought on record.

However, winter planting conditions in central black earth region in European Russia, which fared relatively well this harvest, would be worse than average because of a water deficit, the Moscow-based bureau said.

In Kiev, consultancy Agritel said that the rains which had improved seeding prospects "have left Ukrainian territory, and a clear sky can be observed this morning with temperatures between 25-31 degrees Celsius".

And while worries are growing over the tardiness of the German harvest, which provoked cautions from both Toepfer and US Department of Agriculture analysts, the French crop is viewed as proving better than many had feared.

"French quality is satisfactory," Agritel said.

A surprise rise in the condition of the US corn crop, in a weekly official report, also pressed on grains. The US Department of Agriculture overnight lifted by 1 point to 70% its estimate of American corn in "good" or "excellent" condition, surprising analysts, who had forecast a decline of 1-2 points.

Crop warnings

In other news:

* official meteorologists in China, the second biggest consumer and producer of the grain, forecasting that excessive rains over the next 10 days would damage crops.

*South Africa's crop estimates committee cuts its forecast for the country's 2009-10 corn harvest by 223,000 tonnes to 13.32m tonnes, citing lower than expected yields. South African growers would produce 1.7m tonnes of wheat this year, down 13.4% on last year's harvest, the committee added.